BLBG:Treasuries Hold Decline Before First-Time Jobless Report
Treasuries stayed lower after falling yesterday before U.S. reports this week that economists said will show the job and housing markets are improving.
Ten-year note yields climbed above 2 percent for a second day after the International Monetary Fund raised its forecast for U.S. economic expansion this year to 2.1 percent from 1.8 percent. First-time jobless applications dropped toward the lowest since 2008, while existing home sales increased and a gauge of manufacturing expanded, economists predict data tomorrow will show.
“Moves in Treasuries are definitely data dependent,” said Peter Chatwell, a fixed-income strategist at Credit Agricole Corporate & Investment Bank in London. “A drop in initial claims may unwind some labor market fears, and prove negative for bonds, given we are close to 2 percent on 10-year yields. Decent data could provoke an attack on a slightly soft market.”
The benchmark 10-year Treasury yield was little changed at 2 percent at 6:29 a.m. New York time, according to Bloomberg Bond Trader prices. The 2 percent note maturing in February 2022 traded at 100.
The yield, which has risen from the record low of 1.67 percent set on Sept. 23, will probably remain in a range between 1.95 percent and 2.05 percent in the near term, according to Chatwell. “That range is well established,” he said.
Annual Loss
Treasuries have handed investors a loss of 0.1 percent this year, according to indexes compiled by Bloomberg and the European Federation of Financial Analysts Societies. The MSCI All-Country World Index (MXWD) of stocks returned 10 percent, including reinvested dividends.
Claims for first-time jobless benefits fell to 370,000 last week from 380,000 the previous week, a Bloomberg survey showed before the Labor Department data. The number dropped to 361,000 in February, the lowest since April 2008. Separate surveys forecast existing home sales rose to an annual rate of 4.62 million, and the Federal Reserve Bank of Philadelphia’s general economic index held near the highest since April 2011.
“As long as the labor market is healthy, I’m not worried about the U.S. economy,” said Tsutomu Komiya, who helps oversee the equivalent of $111 billion as an investor in Tokyo at Daiwa Asset Management Co., a unit of Japan’s second-biggest brokerage. The 10-year yield will rise to 2.5 percent by year- end, Komiya said.
TIPS Gain
Treasury Inflation Protected Securities are rallying amid demand for insurance against rising costs as the economy improves. An index of the bonds has gained 2.6 percent this year, versus a 0.2 percent loss for conventional debt, Bank of America Merrill Lynch data show. Thirty-year bonds, among the most sensitive to inflation because of their long maturities, slid 4 percent, the figures show. The U.S. plans to sell $16 billion of five-year TIPS tomorrow.
The difference between yields on 10-year notes and similar- maturity TIPS, a gauge of trader expectations for consumer prices over the life of the debt, has widened to 2.3 percentage points from 1.95 percentage points at the end of 2011.
U.S. consumer prices rose 2.7 percent in March from a year earlier, slowing from 2.9 percent in February, the Labor Department said on April 13. Ten-year Treasuries yield negative 0.69 percent after accounting for costs in the economy. The so- called real yield has been less than zero for almost a year.
Note Sales
The Treasury will tomorrow announce the sizes of three note sales scheduled for next week. The U.S. will auction $35 billion of two-year securities on April 24, the same amount of five-year debt on the following day and $29 billion of seven-year securities on April 26, according to Wrightson ICAP LLC, an economic advisory company in Jersey City, New Jersey, that specializes in government finance.
The two-year yield is consolidating after it fell to 0.266 percent on April 13, the lowest since Feb. 16, according to data compiled by Bloomberg. The yield is holding above the 200-day moving average of 0.2644 percent and testing the 100-day moving average at 0.2761 percent. The yield may find resistance at the 50-day moving average of 0.312 percent.
The two-year yield was little changed at 0.27 percent.
Treasuries fell yesterday after Spain raised more than its maximum target at a bill auction, reducing demand for safer assets. U.S. 10-year yields increased two basis points, or 0.02 percentage point.
Spain Concern
U.S. yields will stay low, said Will Tseng, who trades Treasuries at Taipei-based Shin Kong Life Insurance Co., which has the equivalent of $52.6 billion in assets.
Spanish officials are struggling to improve the nation’s economy, he said. Spain is scheduled to auction two- and 10-year debt tomorrow after surging borrowing costs there this month helped boost demand for Treasuries.
The Fed has pledged to keep its target for overnight lending at almost zero until at least late 2014 to support the expansion. The central bank is also replacing $400 billion of shorter-term debt in its holdings with longer maturities to keep borrowing costs down.
The Fed plans to buy as much as $5 billion of Treasuries due from May 2020 to February 2022 today as part of the plan. It is scheduled to sell as much as $8.75 billion of notes due from July 2013 to January 2014, according to the Fed Bank of New York website.
-- With assistance from TJ Marta in New York. Editors: Mark McCord, Paul Dobson
To contact the reporters on this story: Wes Goodman in Singapore at wgoodman@bloomberg.net; Keith Jenkins in London at kjenkins3@bloomberg.net
To contact the editor responsible for this story: Daniel Tilles at dtilles@bloomberg.net
